Monday, July 21, 2014

1.The
EFF obviously does not agree with the National Treasury Budget Vote because it
is based on the National Development Plan, whose ideological underpinnings are
the same as all the right-wing policies since 1994, GEAR and ASGISA. They all
say pursue growth first and the rest shall follow. Such is narrow and has not
succeeded anywhere. Trickle-down economics do not work anywhere.

2.2014
was supposed to be the year where unemployment and poverty would be halved, but
goal posts have been shifted to the year 2030.

3.We
also reject the budget vote on the basis of a poorly conceptualised radical
economic programme, which do not propose any substantial changes to the
country’s fiscal and monetary policies. Different ANC politicians say different
things in terms of what is meant by radical economic transformation. If there
is anything radical, it is the misdiagnosis on what constraints economic
expansion in South Africa, and a radical misdiagnosis leads to radical
application of wrong remedies. We will deal with that when we respond to the
President’s budget vote on Thursday.

4.There
is however one phenomenon which we seek to address for this budget vote. This
constitutes the reason why the EFF does not agree with the budget vote, but
also a basis of concrete proposals on what is to be done to combat the massive
corporate theft and criminality that has defined South Africa and the whole
resource rich African continent for a very long time.

5.The
phenomenon is called transfer pricing: Under transfer pricing, huge multinational
companies create subsidiary companies in other parts of the world, largely
known as the tax havens. They then sell all the goods and services they produce
to their subsidiary companies in the tax havens, in order to avoid taxes in the
countries where they extract these natural resources.

6.For
instance, if the internationally agreed price of platinum is R1700 per ounce,
these companies sell to themselves for R300 per ounce so that the tax they pay
the country that they extract the natural resource is only for the R300. This
is the most sophisticated form of tax evasion and capital flight defining not
only South Africa today, but other countries such as Zambia for the copper and
Angola and Nigeria for the crude oil.

7.In
South Africa, transfer pricing is a reality and majority of, if not all
companies involved in natural resources engage in transfer pricing. This
deprives the country of a resource base and tax revenue which could contribute
significantly to the money that the State collects from companies to build
schools, hospitals, and fight the diseases which these mines cause. Like we did
in the standing committee on Finance and the portfolio committees of Mineral
resources and Trade and Industry, we once again propose to this house that a
Parliamentary Commission be instituted to forensically investigate the occurrences
of transfer pricing and base erosion.

8.Under this, the commission should ask the critical questions of where
does Lonmin, Glencore, BHP Billiton, Anglo American, African Rainbow Minerals
and Shanduka sell their natural resources to and for how much. We need to
investigate the corporations which ANC Politicians have interests in and we
will discover so many things. We can assure Chairperson, that if this is done,
SA will realise that an equivalent of 25% of its GDP is being eroded by these
forms of corporate criminality and theft.

9.This
also explains the fact that mining as a whole, only contributes less than R25
billion per annum into the national budget, despite the fact the SA is the biggest
producer of more than 52 mineral resources, which make huge profits. What this
means is that the whole revenue generated from Mining and Mines cannot finance
eThekwini Municipality whose annual budget is above R35 billion per annum. Is
it possible maybe that the subsidy which mining companies receive on
electricity, water, and the resources the state spends to repair the
environmental degradation and health hazards caused by mining exceed its
contribution to the national revenue and budget?

10.Now,
the National Treasury and SARS carry an obligation to combat these forms of
corporate criminality and capital theft. There has however never been a
credible programme from both these institutions to combat these phenomena which
rob SA of its potential wealth. Well, there is an ongoing commission on
taxation, and it does not look like there is proper political leadership
provided on this process.

11.Coupled
with local beneficiation and industrialisation, which should be implemented in
a clearly defined and coordinated way, national treasury should retrospectively
collect all the taxes that SA has been robbed of in the mining sector and
utilise the money recovered to heavily invest in local beneficiation and
industrialisation of mineral resources. Such will create jobs, and decisively
deal with the crises of poverty, unemployment and underemployment.

12.There
currently is no clearly coordinated industrial expansion strategy in South
Africa because entities and policy instruments work in silos, and the National
Development Plan, which both the DA and ANC worship, say nothing about the
industrial policy and expansion. If properly prioritised, industrial policy
will illustrate to national treasury that fiscal and monetary policies should
be aligned to the need for industrial expansion.

13.Currently,
the Reserve Bank is in control of monetary policy, and its decisions
recurrently affirm South Africa as a semi-colonial exporter of natural
resources and importer of finished goods and services.

14.Such
should be discontinued, so that the fiscal, monetary, macro and micro-economic
policies are aligned to industrial expansion. Unless such is done, the EFF will
never agree with any budget vote of the national treasury. We vote No!